Renting a booth means you're running your own business, with more opportunities — and more challenges — than being a salon employee. Generally the cost of utilities, hair products and use of towels is included in the rent. If you're charged separately for anything, keep careful records of all amounts paid to the salon. You'll write off each expense on a different line of your tax return. Keep a record of everything you spend for your business and who you're paying for what. Then file Schedule C for your business and Form 1040 for your personal income taxes.
This may be your biggest expense, and of course you can write off the full amount you pay weekly or monthly. If you have to pay a portion of utilities like electricity and water, you can write those off as well. Report rent paid on line 20b (other business property rental) and utilities on line 25 of Schedule C.
If the salon requires you to pay for use of towels, gowns, equipment, laundering or any other services it provides you, outside of the booth rent and not specifically marked as a utilities charge, write those off separately. Take a look at the Schedule C form to find the most appropriate line, and when in doubt, report as "other expenses" on line 48 with a short description.
If the salon charges you for using its shampoo, conditioners, color or other items, take the deduction on line 22 as "supplies." Write off the cost of any hair products you personally purchase for use on clients, but not items you buy for personal use. Take the allowable deduction on line 22.
You'll be expected to provide your own cutting tools, shapers, trimmers, irons and combs. If you purchase new equipment, write it off on your return on line 22 as "supplies." Items that last longer than a year can be depreciated, or written off completely under section 179 on line 13.
If you must give tips or pay other individuals for services they provide you, such as hair washing, color processing or braiding, write off those expenses as "contract labor" on line 11 of your Schedule C. If you pay anyone more than $600 during the year, you'll need to issue them a Form 1099-MISC and report the payment to the IRS. Write off mileage between the salon and other work locations, but not mileage between your home and the salon. Additional deductions are allowed for ads, business cards, cell phones, state license fees and classes taken to improve your skills. Consult the instructions for Schedule C for how to report these eligible expenses.
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